Objective, impartial advice for Property Investors and Landlords with a focus on the Edinburgh area

Tuesday, 25 October 2016

My Concerns About The Edinburgh Property Market

I am genuinely concerned about the Edinburgh property
market, but in a way that might surprise you.

Zoopla announced that average ‘asking prices’ rose in the
last three months by 0.6% in Edinburgh, leaving them 5.1% higher than a year
ago.

Looking at all the data on the Edinburgh property market, and putting aside the
need for more houses to be built in the next decade to balance out the increase
in population (helped in part by inward European migration) but not matched by
a similar increase in housing being built, my research shows there is a
widening gap between what property buyers want and what is available to
buy.

In a nutshell, many more buyers are looking for the smaller one and two bed
properties (the typical semi detached and smaller terraced houses/apartments),
whilst there is an over supply of the four and five bed properties, which are
the typical large detached properties available.

Demand for smaller properties comes from both first time buyers and the growing
number of buy to let landlords, where it is more cost effective and efficient
to buy smaller properties to let out compared to larger properties which tend
to offer poorer returns. Also, landlords with larger loans (on those larger
more expensive properties) will also be hit harder with the changes in the way
tax is paid on buy to let investments, which starts in 2017.

I recently carried out some research on how various types of properties have
performed in Edinburgh since the year 1996 and what struck me was just how
different the various types of properties have performed over the last 20 years
and what this means for our property market and for people trying to trade up
from their starter home to their next home. In a nutshell, this mismatch of
supply and demand isn’t a new phenomenon, it’s been happening under our noses
for years!

In the last 20 years, the average flat in Edinburgh has risen in value from
£58,469 to £145,423, the average terraced house in Edinburgh has risen in value
from £91,214 to £242,502 whilst the detached house has risen in value from £157,539
to £356,444. Nothing seems amiss until you look at the percentage growth. The flat
has grown by 248.7% and the terraced house has grown in value by 265.9% but the
detached house grew by only 226.2%, meaning the gap between the inexpensive flats
and terraced houses and expensive detached properties has in percentage terms
narrowed enormously (this isn’t just a Edinburgh trend, it has happened all
across the Country).

I am concerned because more houses need to be built, not only in Edinburgh, but
in the Lothians and Scotland as a whole. In particular, there is specific need
for more affordable starter homes for the growing demand from both tenants (and
the landlords that will buy them) and first time buyers.

The government needs to face up to the fact that unless they can get the
planners (to release more building land), the banks (to finance the building of
house), the builders (to build houses) and themselves together to ensure long
term plans can be made and implemented, this issue will continue to
worsen.

It is estimated that the country needs 30,000 houses a year to be built to
start to tackle the chronic housing shortage that we have. Last year, only
16,270 properties were built, the year before 14,890 and 14,050 in the year
before that.

This means only one thing for Edinburgh’s landlords. Unless Nicola Sturgeon and
John Swinney start to rip up huge swathes of the Scottish countryside and build
on acres and acres of green belt, demand will always exceed supply when it
comes to property for the foreseeable future.

Therefore investment in the local Edinburgh property market as a buy to let
investment could be the best move to make as stock market investments are
possibly on the wane. Everyone is different and, trust me, there are many
pitfalls in buy to let. You must take lots of advice and seek out the best
opinion.

If you would like to explore how I can help you with your property investments,
or should you require any advice about investing in the Edinburgh property
market, wish to enquire about our Investment Analysis Reports, Property
Sourcing, Residential Lettings or Property Management services, please do not
hesitate to contact me on 0131 603 4570 or at news@thekeyplace.co.uk.

About This Blog

This blog follows the buy to let market in Edinburgh. You'll find tips, guidance, and analysis that relates specifically to Edinburgh and you'll also find properties from all the estate agents in the city on here that may make decent investments. Views expressed are those of the author only.

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Robert Young

Robert Young is the author of this blog.

Robert and his team operate The Key Place and if you're thinking of buying a property to let in Edinburgh, we'll be happy to advise or just offer a second opinion. We can be contacted on robert@thekeyplace.co.uk, or 0131 603 4570.